EUR/USD – Euro Under Pressure, US Nonfarm Payrolls Next

EUR/USD is almost unchanged on Friday, following sharp losses in the Thursday session. The pair is trading just above the 1.14 line in the European session. Today’s sole Eurozone event, Retail PMI, slipped to 47.9 points. It’s a busy day in the US, with three key employment releases, highlighted by Nonfarm Payrolls. The markets are braced for NFP to drop to 203 thousand.

Eurozone retail sales reports remain soft. Retail sales are a key gauge of consumer spending, which is a critical driver of economic growth. On Friday, Eurozone Retail PMI dropped to 47.9 points, its weakest reading since February 2015. The indicator has pushed above the 50-level, which indicates expansion, only once since October. Eurozone Retail Sales declined 0.5%, surprising the markets which had expected a 0.1% gain. Last week, German Retail Sales also dropped, coming in at -1.1%. This marked a second straight decline and was the weakest reading since June 2015. These weak numbers are likely to raise alarm bells at the ECB, as it ponders what steps to take in order to revitalize a struggling economy.

The US labor market has looked excellent in 2016, but this week’s employment numbers have raised concerns with weak numbers. Unemployment Claims jumped to 274 thousand, marking the third straight week that the indicator has risen. This reading was higher than the forecast of 261 thousand, and marked a five-week high. This release comes on the heels of ADP Nonfarm Payrolls, which dropped sharply in April to 156 thousand. This was the weakest reading in over two years, and surprised the markets, which have grown accustomed to releases above the 200-thousand level. We’ll get a look at the all-important Nonfarm Payrolls on Friday. If the NFP report misses expectations, the US dollar could respond with losses. The employment picture has been a bright spot in the US economy, but consumer pending and wage growth have failed to keep pace. Last week, UoM Consumer Sentiment dipped to 89.0 points short of the estimate of 90.3 points. This also marked the fourth straight drop for the key indicator. Consumer spending is a key engine of economic activity, and softer numbers in the first quarter were an important reason that US GDP weakened in the first quarter, with a lukewarm reading of 0.5%.

What can we expect from the Federal Reserve in 2016? In the April policy statement, the Fed didn’t raise rates, but the message to the markets with regard to the US economy was one of cautious optimism. The statement noted continuing improvement in the labor market but added that it was keeping a watchful eye on low inflation levels. Fed policymakers are projecting two or even rate hikes in 2016, and have left the door open to a June hike. With the US releasing key employment numbers on Friday, the markets will be listening closely to the reaction of Fed policymakers, looking for clues regarding the next rate hike.

EUR/USD Fundamentals

Friday (May 6)

  • 8:10 Eurozone Retail PMI. Actual 47.9
  • 12:30 US Average Hourly Earnings. Estimate 0.3%
  • 12:30 US Nonfarm Employment Change. Estimate 203K
  • 12:30 US Unemployment Rate. Estimate 5.0%
  • 19:00 US Consumer Credit. Estimate 161B

Upcoming Key Events

*Key events are in bold

*All release times are GMT

EUR/USD for Friday, May 6, 2016

EUR/USD May 6 at 9:10 GMT

Open: 1.1401 Low: 1.1392 High: 1.1425 Close: 1.1420

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1172 1.1278 1.1378 1.1495 1.1609 1.1711
  • EUR/USD was flat in the Asian session and has posted small losses in European trading
  • There is resistance at 1.1495
  • 1.1378 has weakened in support following losses by EUR/USD in the Thursday session

Further levels in both directions:

  • Below: 1.1378, 1.1278 and 1.1172
  • Above: 1.1495, 1.1609, 1.1711 and 1.1800
  • Current range: 1.1378 to 1.1495

OANDA’s Open Positions Ratio

EUR/USD ratio has shown movement towards long positions, consistent with EUR/USD posting sharp losses on Thursday. Short positions command a strong majority (62%). This is indicative of strong trader bias towards EUR/USD resuming downward movement.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.